Sunday, July 13, 2008

Cities and states to 'come clean' on pensions

In a New York Times article, entitled `Government Rule Makers Looking at Pensions', we learn that the plight of public pensions will soon be brought to light. At risk to the cities and states are their bond ratings, and potential for 'pension misconduct'.

NORWALK, Conn. — As cities and states struggle with ballooning retirement costs, accounting rule makers started an ambitious project Thursday to force state and local overnments to issue better numbers and reveal the true cost of their
pension promises.

Sunday, July 6, 2008

£36bn gone from top 200 UK funds in June

The turndown of equity markets in June cost the top 200 largest privately-sponsored UK pension funds a total of £36bn. That leaves three quarters of the funds in deficit by £30bn. This shocking vulnerability makes one wonder what will happen to pensioners who have the misfortune to start drawing their pensions during a prolonged economic downturn.
At one time it would have been argued that pensions must guarantee a defined standard of living that is independent of equity markets. This social contract made sense to the generation that suffered the Great Depression a World War and two decades of recovery--less so to the current generation of politicians and fund managers.
Shares gloom leaves pension funds with £30bn deficit

Thursday, July 3, 2008

Don't they get the news?

From the Wall Street Journal (3-July):
Europe pension funds' taste for stock-market assets grows
Two pension plans, in France and Switzerland, have increased their equity allocations, demonstrating the growing taste among continental Europe's pension plans for the stock market.
A €6.2 billion ($9.79 billion) French fund that is run by the state-owned power company Électricité de ...

Tuesday, June 24, 2008

NJ unfunded liabilities hit $83 billion

‘New Jersey’s pension fund faces a $25 billion deficit, with the state also obligated for $58 billion in medical benefits for retired government workers.’

$99.2 Trillion Payoff- Will Uncle Sam walk away?

Last week Dallas Federal Reserve Board President, Richard Fisher, priced the present payoff for Social Security, Medicaid and Medicare at $99.2 trillion. This staggering total slipped through the big media outlets almost without comment. One has the sense that no one in America-or the world-believes that we will be able to meet our obligations, but that’s not Mr. Fisher’s main concern. He’s worried that our government will succumb to the temptation that apparently every government before us has, which is to ‘monetize’ the obligation, or reduce the actual burden by printing more money. Fisher notes that:

‘We know from centuries of evidence in countless economies, from ancient Rome to today’s Zimbabwe, that running the printing press to pay off today’s bills leads to much worse problems later on. The inflation that results from the flood of money into the economy turns out to be far worse than the fiscal pain those countries hoped to avoid … Inflation is a sinister beast that, if uncaged, devours savings, erodes consumers’ purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency.’

Richard Fisher, Dallas Fed Reserve President and CEO

When asked the naive question, “Will will Social Security and Medicare have enough money to give me my benefits when I retire?”, the answer is a resounding, “Yes!-provided that we can come up with another $100 trillion over the next few years.” Which is to say “No-it is beyond the realm of the possible.”

Added to the unscalable mountain It is unlikely that the US taxpayer will ever be able to , while addressing ongoing budget shortfalls (currently $10 trillion) as well as unfunded liabilities at every other level of government.